Six years after the Federal Energy Regulatory Commission’s (FERC) passage of Order 1000, progress has been made in most markets toward compliance. However, the number of actual competitive solicitations has been limited, particularly when compared to initial industry expectations.
“The primary objective of FERC Order 1000 was to create new opportunities for long-distance transmission line development by eliminating market entry barriers for independent transmission developers,” said Robert Mechler, Director of Transmission and Distribution Project Development at Black & Veatch. “Historically, utilities had the right to build transmission lines in their service territory. With Order 1000, FERC stated that as transmission owners, you no longer have this exclusive right.”
David DesLauriers, a Director in Black & Veatch’s transmission advisory and planning practice, believes that the limited number of competitive solicitations may be driven by a number of factors, including:
- Cost containment and risk balance
- Divergent models (competitive versus sponsorship)
- Transparency of process
- Seams issues
- Right of first refusal
“To date, there have been a very limited number of competitive transmission projects,” said DesLauriers. “However, each region continues to identify new opportunities that draw interest from numerous market players. Unfortunately, the competitive processes are not fully optimized and are largely a work in progress.”
FERC 1000: Outlook
Since its issue, Order 1000 has been challenged with numerous lawsuits and with each, the Courts have upheld the tenants of Order 1000. As such, it is unlikely that FERC will move to make any substantive changes to the core workings of the Order. Additionally, each of the more organized RTO markets, PJM, MISO, SPP, and CAISO for example, continue to make some headway into a broader, competitive transmission framework. Each has developed and improved their own unique processes of study, qualification, and award of select transmission projects. This has led to a steady offering of opportunities, albeit very few in number.
With the growth of renewable generation, the need for new and cross-regional transmission lines will substantially increase. The next big hurdle for FERC Order 1000 is how these projects will be realized given the differences in the regions.
Although the electric power industry hasn’t seen a true ‘new era’ in competitive transmission projects, there continue to be interest in a more open market. Independent transmission developers are proposing a number of exciting, large projects. There are new transmission-only firms that are aggregating small systems and proposing much needed upgrades. And there are new joint ventures between traditional incumbents and new players which bring an increased level of cooperation to a diverse market.